Europe and China's green shoots have US gardener to thank

The economies of China and Europe are finally showing signs of a pickup. Chinese imports and exports rebounded in July, with imports up 10.9 percent year-over-year, well above expectations of a gain of about two percent.

Especially welcome was a surge in iron ore and crude oil. Copper imports were up 8 percent as well, while exports were up 5.1 percent respectively after dropping in June, also well above expectations of a three percent gain.

In a particularly encouraging development, exports to the U.S. were up 5.3 percent; European shipments were up by 2.8 percent.

These figures support the thesis—which we have discussed this week— that the U.S. recovery is a help to China, and that even Europe is now showing improvement. July manufacturingnumbers in Europe were the highest in two years.

This data series has been under a cloud of suspicion all year, as the government has acknowledged that some companies appear to be disguising illicit cash transfers in import and export trades. However, this appears to have been cleared up.

Recent data from Europe has been encouraging, but can still be choppy. For example, German exports in June rose only 0.6 percent, below expectations of a gain of one percent. Imports fell fractionally.

Elsewhere:

1) Retail earnings disappointing: Tumi is a big loser, missed on top and bottom line, and lowered sales expectations for the year. Elizabeth Arden missed, and full year earnings and revenue guidance was also lowered;

2) Mixed July same store sales, up 4.4 percent according to RetailMetrics, without Walgreen up 3.6 percent. L Brands doing 3 percent comp, better than expected, as smaller discounts like Fred's and Stein Mart were better than expected. Apparel was weak: Tumi, Buckle and Cato all came in below expectations. Teen retailers are really struggling: American Eagle already warned while Aeropostale saw same store sales down 15 percent (!) and lowered guidance. Route 21 was also disappointing.

Why the dismal results? A lot of teens are unemployed this summer! Back to school is looking very promotional. And wage gains have been meager for middle and lower income people, so there is not a lot of discretionary income.

2) Fascinating IPOs today: synthetic biology firm Intrexon (XON) prices 9.9M shares (more than the 8.3M expected) at $16 each, high end of the $14—$16 range. This is an amazing technology: with genetic engineering you are manipulating an organism's genome, with synthetic biology you are building a new life form from the ground up. This is the field Craig Venter, who cracked the human genome, is also working in.

What can you do with this? How about develop new organisms that, say, eat oil spills? Or that exhale hydrogen as a waste product that can be used for fuel? Or it is now possible to create new life forms that can be placed on microchips that can sense toxins. They can detect viruses, bacteria, hormones. Get it? Artificial life!

3) Fannie Mae made a profit of $10.1 billion and will pay the U.S. government $10.2 billion of that back, as part of its agreement to turn offer essentially all of its profits after the government bailout. Freddie Mac will also pay $4.4 billion this quarter to the government. FNM has paid about $105 billion in dividends so far. The bailout for BOTH Fannie Mae and Freddie Mac amounted to $188 billion. This is turning into an enormous cash cow for the U.S. government.